Gyroscopic Investing

Since the PP does go up over time, then buying dips is valid strategy.  I guess up until the point bonds cease acting as hedges in an extended deflation.  All our troubles would be over if we could just lever the damn cash!

MachineGhost wrote: Since the PP does go up over time, then buying dips is valid strategy.  I guess up until the point bonds cease acting as hedges in an extended deflation.  All our troubles would be over if we could just lever the damn cash!

Here you go: http://www.pureleveragedcash.com/
No, don't thank me, it's just a public service.

Those who criticized me for waiting misunderstood as I am not waiting for the HBPP to crash.  Plus, who knows exactly when the low really is in?  What I am doing is waiting to buy the dip of each of the 3 major assess.

For example, gold is beaten down right now, so I will start accumulating in portions as it keeps going down until it reaches 25% of my portfolio.  Same idea for stock and long bond.  And then I will get to a point where I have all 4 assess.  Sure, I will miss the real low, but at least I know that I bought them on some sort of dip.  If I jump all in now, how can I live with the fact that stock is over extended and that interest rate will rise?

push3r wrote: For example, gold is beaten down right now, so I will start accumulating in portions as it keeps going down until it reaches 25% of my portfolio.  Same idea for stock and long bond.  Sure, I will miss the real low, but at least I know that I bought some on the dip.  If I jump all in now, how can I live with the fact that stock is over extended and that interest rate will rise?

Oh, you're talking about buying/contributing towards the lagging asset?  I think that actually underperforms according to sophie's research.

MachineGhost wrote:

push3r wrote: For example, gold is beaten down right now, so I will start accumulating in portions as it keeps going down until it reaches 25% of my portfolio.  Same idea for stock and long bond.  Sure, I will miss the real low, but at least I know that I bought some on the dip.  If I jump all in now, how can I live with the fact that stock is over extended and that interest rate will rise?

Oh, you're talking about buying/contributing towards the lagging asset?  I think that actually underperforms according to sophie's research.

So are you saying that when one starts the HBPP, it's better to jump all in with a lump sum no matter if you have some clues that the world might blow up in the near future?  What's the best approach when one starts the HBPP from scratch? 

To me, it's kind of strange to buy stock now even though there are clues that there's a much higher probability that it will dive. 

Like I said, with my method of buying the dip, just to start out, until I have THE HBPP built, then I will follow the HBPP method as recommended.

push3r wrote:

MachineGhost wrote:

push3r wrote: For example, gold is beaten down right now, so I will start accumulating in portions as it keeps going down until it reaches 25% of my portfolio.  Same idea for stock and long bond.  Sure, I will miss the real low, but at least I know that I bought some on the dip.  If I jump all in now, how can I live with the fact that stock is over extended and that interest rate will rise?

Oh, you're talking about buying/contributing towards the lagging asset?  I think that actually underperforms according to sophie's research.

So are you saying that when one starts the HBPP, it's better to jump all in with a lump sum no matter if you have some clues that the world might blow up in the near future?  What's the best approach when one starts the HBPP from scratch? 

To me, it's kind of strange to buy stock now even though there are clues that there's a much higher probability that it will dive. 

Like I said, with my method of buying the dip, just to start out, until I have THE HBPP built, then I will follow the HBPP method as recommended.

Wow, what a novel idea. How come no one else has thought to approach investing in the PP in the manner you describe? We must all be neophytes. Do you have a newsletter so that I can follow all of your trades?

In all honesty, limping into the portfolio is illogical as one or more of the other assets tend to rise in response to the asset that is under-performing. Why give up the upside potential to purchase something on the cheap? You may never have another opportunity to buy gold, treasuries or even stocks at this price. The S&P used to be under 100 and the Japanese would die to lockin 30-year bonds at current US rates.

push3r wrote: LC475, a while back, when was that?

Back around 2013, I guess.  Just trucking along ever since.  No problems.  No complaints.  Seems to be doing exactly what it should do.

Just for fun, I setup a test HBPP last December 2014 and saw it gaining about 2.5%.  And then last week came and boom! the test portfolio is in negative territory

I am shocked -- shocked! -- that this portfolio that I know and love would have a negative return over this..... hmm.... let me do some quick counting... Ahh, yes: three month period.  I mean, three whole months!  How long term can you get?  Nobody would expect to have to wait longer than three months for returns.  Would they?

Now, if everything was reversed, I would jump in with both feet!

When in the world has "everything been reversed"?  Name that time!  Certain know-it-alls here I'm sure can tell you exactly when such times were, but in reality: nobody knows.  You only know in hindsight.  Everything might be reversed right now at this instant!  Stocks, gold, and either bonds or cash might all be about to start giving some significant returns.  You just never know.

That you think you do know is your arrogance.

In investing, we pay for our arrogance.

Humility truly is a virtue.

So are you saying that when one starts the HBPP, it's better to jump all in with a lump sum no matter if you have some clues that the world might blow up in the near future?  What's the best approach when one starts the HBPP from scratch? 

To me, it's kind of strange to buy stock now even though there are clues that there's a much higher probability that it will dive. 

Like I said, with my method of buying the dip, just to start out, until I have THE HBPP built, then I will follow the HBPP method as recommended.

I started mine in Mar 2014.  All in, one time.  Took all my strength to buy in, thinking stocks and bonds had to tank after years of gains, and gold had to go up after years of losses.  The exact opposite happened. 

What if gold, say, starts back up (oh my?).  Will you never get to your 25% allocation because you're waiting for it to fall to some level?  "All in" was really the only way for me because I suck at timing.

push3r wrote: So are you saying that when one starts the HBPP, it's better to jump all in with a lump sum no matter if you have some clues that the world might blow up in the near future?  What's the best approach when one starts the HBPP from scratch? 

To me, it's kind of strange to buy stock now even though there are clues that there's a much higher probability that it will dive. 

Like I said, with my method of buying the dip, just to start out, until I have THE HBPP built, then I will follow the HBPP method as recommended.

I think it's perfectly reasonable to tweak the allocations of the portfolio, so long as you're within the 15-35 bands, and you back-test the thing to make sure it works to your satisfaction. But if you go outside the bands, the portfolio really does appear to break, and if something bad happens while you've got three of the four chair legs glued on, then you're going to end up on the ground.

At the risk of sounding like a broken record, I'm at 15% gold because I think gold is going to fall further. Just my opinion. It's my money. When it's at a low enough level, I'll be all in. But, the portfolio works good enough for me from 1975-present with 15% gold. So if I'm wrong, and gold never goes lower, and only goes up... who cares? I won't. And if gold goes up, my gold % will naturally rise, so problem of being at the low edge of the band solves itself naturally.

I'm at full 25% cash allocation, but I'm going to let my new money flow into my accounts and not use it buy anything until I hit 35% cash, which will probably be after we have our stock market correction, and after bonds correct due to interest rate rises. Natural market timing; water spills from one bucket into the next.

The problem is that if gold goes down (as you expect) even the slightest bit, you're instantly having to rebalance.

Xan wrote: The problem is that if gold goes down (as you expect) even the slightest bit, you're instantly having to rebalance.

What do you "instantly"? Within a nano second? A day? A week? Because why? The sky will fall if you're at 14.8% gold? O the humanity.

You put a mirror of your portfolio on Google Finance... when you see you need more gold, you place a trade from your phone. Done in a minute.

ochotona wrote: At the risk of sounding like a broken record, I'm at 15% gold because I think gold is going to fall further. Just my opinion.

Just to be clear:  if you're buying and selling assets in accordance with your predictions, that isn't a PP.  It's speculation with the PP assets, which is something different.  It would help newcomers who might otherwise get confused.

Of course you can do whatever you please with your money, and your speculation may turn out to be very productive.  I'm just curious why you chose the a conservative investing plan like the PP to do your speculating with, when you could be playing stocks in the usual way for potentially bigger gains.

That said - converting a large chunk of cash by waiting a few days for transient dips in the PP and then buying all 4 assets equally is an attractive way to get a bit of extra starting returns right out of the gate.  I wouldn't try to time individual assets though...they have a way of going up and leaving you in the dust when you least expect it, and you're left having bought only the assets that were on their way down.

sophie wrote: That said - converting a large chunk of cash by waiting a few days for transient dips in the PP and then buying all 4 assets equally is an attractive way to get a bit of extra starting returns right out of the gate.  I wouldn't try to time individual assets though...they have a way of going up and leaving you in the dust when you least expect it, and you're left having bought only the assets that were on their way down.

My wife and I both started PPs last year and mine did much better than hers because I started at the beginning of the year when much of the gains for 2014 occurred. I didn't try to time things with either entry point. Things could have gone the other way. That being said, I think now is not a bad time to jump all in because we've seen a decline off of the January high. We don't know what will happen going forward but we do now know in hindsight that now is a better buy point for the whole package than the beginning of February.

sophie wrote: Just to be clear:  if you're buying and selling assets in accordance with your predictions, that isn't a PP.  It's speculation with the PP assets, which is something different.  It would help newcomers who might otherwise get confused.

Of course you can do whatever you please with your money, and your speculation may turn out to be very productive.  I'm just curious why you chose the a conservative investing plan like the PP to do your speculating with, when you could be playing stocks in the usual way for potentially bigger gains.

That said - converting a large chunk of cash by waiting a few days for transient dips in the PP and then buying all 4 assets equally is an attractive way to get a bit of extra starting returns right out of the gate.  I wouldn't try to time individual assets though...they have a way of going up and leaving you in the dust when you least expect it, and you're left having bought only the assets that were on their way down.

My definition of speculation isn't tweaking an asset allocation plan within it's known and back-tested limits of stability.

Libertarian666 wrote: No, don't thank me, it's just a public service.

I thought anarchists didn't believe in the "public interest"?  Hah!

sophie wrote: Of course you can do whatever you please with your money, and your speculation may turn out to be very productive.  I'm just curious why you chose the a conservative investing plan like the PP to do your speculating with, when you could be playing stocks in the usual way for potentially bigger gains.

I think it's a risk issue.  No one is going to speculate with 100% of their net worth in stocks unless they're a money moron, but they will with 1%-10%.  The PP has the advantage of being a safety-net for substantial amounts of capital, even if you leg in initially...  you have security of knowing that it will all work out in the end by just adopting the full plan.  In contrast, when you have a loser from speculating, all you can do is lock in the loss and exit.

sophie wrote: Just to be clear:  if you're buying and selling assets in accordance with your predictions, that isn't a PP.  It's speculation

So, what matters?
1. Inner motivations and feelings, or
2. Actual reality on balance sheet

For my part, I would say reality counts more.  A portfolio with:

15% gold
25% cash
30% stocks
30% bonds

sounds awfully PP-ish to me.  I would say that it's not a pure PP (only because the gold is not going to be rebalanced up to 25% once it falls below 15%), but it's certainly PP-ish.  Why should that be cast out with aspersions of "speculation! speculation!" while, say, buying a bunch of I-Bonds instead of cash still counts as a PP?  Or buying gold ETFs instead of gold?  Mmm?

ochotona wrote:

Xan wrote: The problem is that if gold goes down (as you expect) even the slightest bit, you're instantly having to rebalance.

What do you "instantly"? Within a nano second? A day? A week? Because why? The sky will fall if you're at 14.8% gold? O the humanity.

You put a mirror of your portfolio on Google Finance... when you see you need more gold, you place a trade from your phone. Done in a minute.

My point is that if you believe in the bands, as you claim to, and on Day 1 you start with one of the assets right on the absolute lower edge, then on Day 2 you're likely to be buying gold and bringing it up to 25%.  You might as well start out there.

Maybe the problem is this:

The choice isn't between the Permanent Portfolio and speculation.  One cannot say "either you have a PP or you are speculating".  That's not true.  That's a false dichotomy.

No, the contrasting alternative to speculating is investing.

According to Harry Browne, you are investing whenever you accept the rate of return that anyone can get, any Joe on the street, with no special knowledge nor training.  Examples of investing would be putting your money in a savings account, or buying US Treasury bonds.  You just accept whatever the broad market is giving.  That's your target, and that's exactly what you get, because that's what you're shooting for, and you're content with that.

You are speculating whenever you attempt to beat the return available on the market.  Whenever you say "I can do better than the average Joe because of XYZ" and you act on that hunch.  That's speculating.

There are many ways of investing other than having a Permanent Portfolio.  For example, having a 100% gold portfolio would be investing.  You just hold gold and accept whatever return the market is giving to gold.  Or, the examples Harry Browne gave: you put all your money in a bank savings account.  That's not speculating, that's investing.  Or into Treasury bonds.  That's not speculating, that's investing.

ochotona may not be using a pure Harry Browne Permanent Portfolio strategy, but it seems to me he is still using a strategy that fits in the category of investing, not of speculating.

Xan wrote: My point is that if you believe in the bands, as you claim to, and on Day 1 you start with one of the assets right on the absolute lower edge, then on Day 2 you're likely to be buying gold and bringing it up to 25%.  You might as well start out there.

It is a ridiculous point that seems to be based on a misunderstanding.  Make it 16% then.  Then maybe you will understand.

The deviation is not the band.  Nor anything about "instant"s nor "Day 2"s.  The deviation is that ochotona is not rebalancing up to 25%.  So, he starts out with gold at 16%.  Eventually, it drops below 15% (maybe).  If it does, then he buys enough to get it back up to 16% again.  He's rebalancing to 16%, see?  Not 25%.  Whenever it falls below the HB-approved 15% band, he brings it back up just barely above it, to 16% (or whatever).

There are problems with this strategy, I personally would not recommend it, but it seems to work for ochotona.

If my gold allocation target is temporarily 15% while gold is overpriced, then if it falls to 14%, then I will push it back up to 15%, not 25%. So no, I don't just snap into the orthodox PP at first gold decline.

Should gold get to $850 then 25% gold.

ochotona wrote: If my gold allocation target is temporarily 15% while gold is overpriced, then if it falls to 14%, then I will push it back up to 15%, not 25%. So no, I don't just snap into the orthodox PP at first gold decline.

Should gold get to $850 then 25% gold.

Still not seeing how this helps, since you're so certain of a plummet in gold.  This strategy has you constantly buying overpriced gold.  Every day you'd buy overpriced gold.

ochotona wrote: If my gold allocation target is temporarily 15% while gold is overpriced, then if it falls to 14%, then I will push it back up to 15%, not 25%. So no, I don't just snap into the orthodox PP at first gold decline.

Should gold get to $850 then 25% gold.

You know, the problem with valuation is its a terrible timing mechanism.  And gold isn't really prone to being valued in the first place.  All you can do is judge whether real interest rates are above or below 2% and even then, its a poor timing mechanism as the past couple of years has shown.

Technicals triumphs valuation.  I hope you know what you're doing.  The only way you win with technicals is to be disciplined and systematic about it.  That's why the rebalancing bands work (if followed).  If you don't like that, your alternative better be up to the same standard.

Gold may be overpriced... but maybe not. I think there is more downside risk than upside, so I trim my sails.

I don't speculate. I invest. I don't hop in and out. Don't describe my intentions falsely. I am happy to dollar cost average into a declining asset over a period of years

MachineGhost wrote:

Libertarian666 wrote: No, don't thank me, it's just a public service.

I thought anarchists didn't believe in the "public interest"?  Hah!

No, I believe there are things that help the public generally.
However, no one has the right to make me do anything, regardless of whether it would help the public generally.